IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

The Effect of Global Liquidity on Macroeconomic Parameters

  • Goknur Umutlu

    ()

    (Hacettepe University Dept of Business Administration Ankara Turkey)

  • Yilmaz Yildız

    (Hacettepe University Dept of Business Administration Ankara Turkey)

Registered author(s):

    Depending on the international economic integration as a result of the increasing globalization, national economies have become more sensitive to the external economic developments. In such an environment, it is important to understand the concept of international liquidity and its effects. We analyze the effect of global liquidity on Turkish economy in this study. To examine the impact of global liquidation on Turkish economy empirically, Vector Autoregressive (VAR) model and cointegration tests are applied by using the data between 1990Q1-2008Q3 periods. Cointegration results indicate that global liquidation moves together with Turkey’s national income, inflation rate, treasury benchmark interest rate and real exchange rate in the long run. According to the results of Granger causality test, it is seen that there is causality from global liquidation towards Turkey’s key macroeconomic variables. The impact-response analysis of the VAR model figures out the increase in global liquidity leads an appreciation in Turkey’s real exchange rate, decreases national income, inflation and interest rates. The results of the variance decomposition confirms that the longer the period under review, the stronger the effect of global liquidation. Our findings in this study emphasize the importance of global integration and liquidity on Turkish economy which is articulated with the world economy.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL: http://www.aessweb.com/download.php?id=1067
    Download Restriction: no

    File URL: http://www.aessweb.com/archives.php?m=September&id=1067
    Download Restriction: no

    Article provided by Asian Economic and Social Society in its journal Asian Economic and Financial Review.

    Volume (Year): 1 (2011)
    Issue (Month): 3 (September)
    Pages: 167-181

    as
    in new window

    Handle: RePEc:asi:aeafrj:2011:p:167-181
    Contact details of provider: Postal: Sadeeq Block, Near Fawara Chowk, Abbasia Town, Rahim Yar Khan - 64200, Punjab, Pakistan
    Web page: http://www.aessweb.com/

    References listed on IDEAS
    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

    as in new window
    1. Sousa, Joao Miguel & Zaghini, Andrea, 2006. "Global monetary policy shocks in the G5: A SVAR approach," CFS Working Paper Series 2006/30, Center for Financial Studies (CFS).
    2. Thierry Bracke & Matthieu Bussière & Michael Fidora & Roland Straub, 2008. "A framework for assessing global imbalances," Occasional Paper Series 78, European Central Bank.
    3. Martín González Rozada & Eduardo Levy Yeyati, 2006. "Global Factors and Emerging Market Spreads," Research Department Publications 4445, Inter-American Development Bank, Research Department.
    4. Joao Sousa & Andrea Zaghini, 2008. "Monetary policy shocks in the euro area and global liquidity spillovers," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 13(3), pages 205-218.
    5. Rüffer, Rasmus & Stracca, Livio, 2006. "What is global excess liquidity, and does it matter?," Working Paper Series 0696, European Central Bank.
    6. D'Agostino, Antonello & Surico, Paolo, 2007. "Does global liquidity help to forecast US inflation?," Research Technical Papers 10/RT/07, Central Bank of Ireland.
    7. Brenda González-Hermosillo, 2008. "Investors’ Risk Appetite and Global Financial Market Conditions," IMF Working Papers 08/85, International Monetary Fund.
    8. Frederic Mishkin, 2005. "Is Financial Globalization Beneficial?," NBER Working Papers 11891, National Bureau of Economic Research, Inc.
    9. Olcay Yucel Culha & Fatih Ozatay & Gulbin Sahinbeyoglu, 2006. "The Determinants of Sovereign Spreads in Emerging Markets," Working Papers 0604, Research and Monetary Policy Department, Central Bank of the Republic of Turkey.
    10. R. F. Gemmill, 1960. "Notes On The Measurement Of International Liquidity," Journal of Finance, American Finance Association, vol. 15(1), pages 53-61, 03.
    11. Roffia, Barbara & Zaghini, Andrea, 2007. "Excess money growth and inflation dynamics," Working Paper Series 0749, European Central Bank.
    12. Bracke, Thierry & Fidora, Michael, 2008. "Global liquidity glut or global savings glut? A structural VAR approach," Working Paper Series 0911, European Central Bank.
    13. Rudiger Ahrend & Pietro Catte & Robert W.R. Price, 2006. "Factors Behind Low Long-Term Interest Rates," OECD Economics Department Working Papers 490, OECD Publishing.
    14. Annick Bruggeman, 2007. "Can Excess Liquidity Signal an Asset Price Boom?," Working Paper Research 117, National Bank of Belgium.
    15. Klaas Baks & Charles Frederick Kramer, 1999. "Global Liquidity and Asset Prices; Measurement, Implications, and Spillovers," IMF Working Papers 99/168, International Monetary Fund.
    16. Gabriele Galati & Alexandra Heath & Patrick McGuire, 2007. "Evidence of carry trade activity," BIS Quarterly Review, Bank for International Settlements, September.
    17. repec:rwi:repape:0037 is not listed on IDEAS
    18. Williamson, John, 1973. "Surveys in Applied Economics: International Liquidity," Economic Journal, Royal Economic Society, vol. 83(331), pages 685-746, September.
    19. Matthew Higgins & Thomas Klitgaard & Robert Lerman, 2006. "Recycling petrodollars," Current Issues in Economics and Finance, Federal Reserve Bank of New York, vol. 12(Dec).
    20. Michael R. King & Philipp Maier, 2007. "Hedge Funds and Financial Stability: The State of the Debate," Discussion Papers 07-9, Bank of Canada.
    21. Greiber, Claus & Setzer, Ralph, 2007. "Money and housing: evidence for the euro area and the US," Discussion Paper Series 1: Economic Studies 2007,12, Deutsche Bundesbank, Research Centre.
    Full references (including those not matched with items on IDEAS)

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:asi:aeafrj:2011:p:167-181. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Qazi Muhammad Imran)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.